New rules enacted Tuesday by the Treasury Department are limiting the number of models that qualify for an electric vehicle tax credit—and only ten currently meet the requirements.
A key provision of the Inflation Reduction Act is a tax credit on new and used electric vehicles (EVs), designed to make them more affordable for U.S. consumers while tackling climate change and boosting U.S. auto manufacturing.
Consumers can get up to $7,500 in tax credits on new EVs, or $4,000 on used ones, provided they do not resell the vehicle, use it outside of the U.S., or exceed a given income threshold. However, only 10 models now qualify for the full credit after stricter battery sourcing rules take effect, making most plug-in models ineligible.
- The Inflation Reduction Act of 2022 provides a tax credit for consumers who purchase an electric vehicle (EV).
- EV buyers get a $7,500 credit for new vehicles or $4,000 for used ones.
- Only 10 models qualify for the credit after the Treasury Department announced new rules
- New rules include stricter battery sourcing and manufacturing requirements.
Vehicles that qualify for the full $7,500 in tax credits include the Cadillac Lyriq; Chevrolet Blazer, Bolt, Bolt EUV, Equinox, and Silverado; Chrysler Pacifica PHEV, Ford F-150 Lightning, Lincoln Aviator Grand Touring, and Tesla Model 3 Performance. Pricier EVs such as the Hummer EV, Lucid Air, and Tesla Model S and Model X do not qualify for the full credit.
|Which EVs Qualify For the Full $7,500 Tax Credit?|
|Lincoln||Aviator Grand Touring||2022-2023||$80,000|
|Tesla||Model 3 Performance||2022-2023||$55,000|
General Motors (GM), Tesla (TSLA) and Ford (F) all have at least one EV that will qualify, while Ford and Stellantis (STLA) each have one eligible plug-in hybrid model.
The $7,500 credit is broken down into two parts—battery manufacturing and critical minerals sourcing requirements. The rules require a percentage of critical minerals required in the battery to be sourced from the U.S. or its trade partners. The battery manufacturing requirement sets a threshold for a substantial percentage of the battery to be assembled or manufactured in North America.
Some plug-in hybrids, including the Ford Escape, the Jeep Wrangler and Chrysler Pacifica qualify for only half of the credit.
These rules also mean that Volkswagen (WVAPY), BMW (BMWYY), Nissan, Hyundai, and Volvo electric vehicles, which are mostly produced outside of the U.S., will lose access to the tax credit.
An updated list of EVs eligible for tax credits can be found at fueleconomy.gov. Some manufacturers have yet to submit information on vehicle eligibility, according to the site.
The White House. "Remarks by President Biden at Signing of H.R. 5376, The Inflation Reduction Act of 2022."
Internal Revenue Service. "Credits for New Clean Vehicles Purchased in 2023 or After."
U.S. Treasury Department. "Treasury Releases Proposed Guidance on New Clean Vehicle Credit."
U.S. Treasury Department. "Guidance on New Clean Vehicle Credit."